Nepal: Remittance as Business

The sharp rise in the number of people working abroad in the past two decades has seen with it a major rise in the amount of money coming into Nepal via remittance companies. Nepal’s history of migrant employment originates in the early nineteenth century when Nepalese soldiers began working for the British army. In the following decades, hundreds of thousands of Nepalese worked for the British and Indian armies and currently, over 60 thousand Nepalese are working in the Indian Army and other government institutions in India. According to the National Planning Commission (NPC), the number of overseas workers has grown, on average, by 30% in the last few years. There are now an estimated 1.2 million Nepalese working in 40 countries, excluding India.

The financial streams generated by those working abroad are substantial, and it is clear that migrant workers’ remittance is a strong source of income for Nepal. It is estimated that in 2004 money transferred from migrant Nepalese reached Rs.100 billion (official and unofficial channels) – making it a bigger source of financial gain than tourism and all exports combined. Workers remittance is now considered a backbone of Nepal’s economy. According to a study by the Department of International Development (DFID), the value of foreign remittance from migrant labourers could be equivalent to 25% of the official gross domestic product (GDP).

Remittance income is playing a vital role in the economic growth of Nepal, and the rush in remittance has led to a surplus foreign exchange reserves. Remittance through official channels rose from Rs. 65.5 billion in 2004/05 to Rs. 209.70 billion in 2008/09. Plus, the share coming through the official channels has increased. For example, while in 2004/05, just 27% flowed into the country through official channels as opposed to 73% unofficial, but in 2009/10 almost 90% entered through official channels.

Today, the process of money transfer to Nepal from abroad has become much more efficient and hassle free. EasyLink Pvt. Ltd, first licensed remittance company registered in 1999 to operate money transfer business in the country. Then after the door had open for all national & international companies to transact this business. There are now 52 remittance companies including big international names like Western Union and MoneyGram, transferring money from all over the world into Nepal Since 2001, the flow of remittance into the country has grown at an annual pace of 15% – 20%. It is expected to continue this way as the number of people going abroad in search of work is increasing day by day. Remittance market studies show that approx. 40% of the total inward remittance to Nepal is collected within the Kathmandu valley.

As well as the international players – Western Union and MoneyGram, – the major remittance businesses in Nepal are the Himalayan Bank, International Money Express, NABIL Bank and the Bank of Kathmandu. The Himalayan Bank brings in almost $20 million USD per month and International Money Express (IME) brings almost $12 million USD per month. Western Union is handling 18,000 remittance transactions per month with a 30% increment p.a. and an average amount of $700 USD per transaction.

Sending or receiving money via remittance companies is simple, secure, reliable and more often that not – extremely quick. Massive improvements in transaction time mean that money sent to from abroad can be picked up in Nepal 10 minutes later. Remittance businesses are playing an increasingly large role in the economic development of Nepal. They are contributing to economic growth and development that benefits the people of Nepal.